HASEKO (TSE:1808) Is Due To Pay A Dividend Of ¥45.00

The board of HASEKO Corporation (TSE:1808) has announced that it will pay a dividend on the 8th of December, with investors receiving ¥45.00 per share. This will take the annual payment to 3.7% of the stock price, which is above what most companies in the industry pay.

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HASEKO's Payment Could Potentially Have Solid Earnings Coverage

If the payments aren't sustainable, a high yield for a few years won't matter that much. Before making this announcement, HASEKO was earning enough to cover the dividend, but it wasn't generating any free cash flows. No cash flows could definitely make returning cash to shareholders difficult, or at least mean the balance sheet will come under pressure.

Over the next year, EPS is forecast to expand by 12.3%. Assuming the dividend continues along recent trends, we think the payout ratio could be 72% by next year, which is in a pretty sustainable range.

See our latest analysis for HASEKO

Dividend Volatility

While the company has been paying a dividend for a long time, it has cut the dividend at least once in the last 10 years. The dividend has gone from an annual total of ¥10.00 in 2015 to the most recent total annual payment of ¥90.00. This works out to be a compound annual growth rate (CAGR) of approximately 25% a year over that time. Despite the rapid growth in the dividend over the past number of years, we have seen the payments go down the past as well, so that makes us cautious.

Dividend Growth Is Doubtful

With a relatively unstable dividend, it's even more important to evaluate if earnings per share is growing, which could point to a growing dividend in the future. It's not great to see that HASEKO's earnings per share has fallen at approximately 6.3% per year over the past five years. A modest decline in earnings isn't great, and it makes it quite unlikely that the dividend will grow in the future unless that trend can be reversed. Earnings are predicted to grow over the next year, but we would remain cautious until a track record of earnings growth is established.

HASEKO's Dividend Doesn't Look Sustainable

In summary, while it's always good to see the dividend being raised, we don't think HASEKO's payments are rock solid. While the low payout ratio is a redeeming feature, this is offset by the minimal cash to cover the payments. We would probably look elsewhere for an income investment.

Investors generally tend to favour companies with a consistent, stable dividend policy as opposed to those operating an irregular one. However, there are other things to consider for investors when analysing stock performance. Case in point: We've spotted 4 warning signs for HASEKO (of which 1 makes us a bit uncomfortable!) you should know about. Is HASEKO not quite the opportunity you were looking for? Why not check out our selection of top dividend stocks.

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